EU backs Monte Paschi capital hike plans

Plans by Italian lender Banca Monte dei Paschi di Siena (BMPS) to raise over double its planned capital increase under a new bailout program have won the support of the European Union's antitrust regulator.

"In principle the original idea of the Monte dei Paschi managers and of the Italian government was to increase the capital by 1 billion euros," Joaquin Almunia, the European competition commissioner told CNBC.

"We have asked them to be more ambitious because the bank should not only have a viable business model but a solid balance sheet."

European Authorities are still due to approve 4.1 billion euros ($5.4 billion) in state loans to BMPS as the scandal-hit bank tries to turn around its fortunes after a series of losses on derivatives trades that date back from 2008.

The country's third-largest bank will now look to investors to inject 2.5 billion euros ($3.3 billion) of fresh capital for the planned capital increase, or the firm may face the threat of nationalization.

Almunia originally ordered BMPS to modify its restructuring plan in a letter sent to the Italian government on July 16. He also indicated at the time that the bank was too soft on executive pay, cost-cutting, provisioning policies and treatment of creditors.

After regular discussions throughout the summer, Almunia met with Fabrizio Saccomanni, the Italian minister of finance and economy, on Sunday to discuss the state bailout for the lender in what he described as a "positive" meeting.

The bank is now currently led by Chairman Alessandro Profumo and CEO Fabrizio Viola who are doing a "very good job", according to Almunia.

"They went there for the first time, the situation was difficult. But now I think thanks to the work done in Italy and thanks also to the efforts of my team I think we are very close to a very positive decision," he said.